Can payment of a Legal Charge on property sale completion be deducted in CGT calculation?

mayflyjules

poseidon1 said:

silvercar said:

Given that it has been empty for 2 years and your father presumably has not needed to sell it up to this point, does he actually need the money?

I’m guessing he’s quite elderly. If he doesn’t need the money, I’d be doing a calculation as to whether it is worth selling it at this point in time. There is no CGT on death, so his estate would benefit from the full value less the DPA charge. In the interim it could be rented out, giving him some income. 

Assuming LOA  agree to letting house,  the father would have to contend with the interest compounding daily on the DPA as well as the dubious benefit of being a landlord in a current hostile environment for landlords. 

In reality the burden of operating the letting as well as ongoing compliance with LOA would have to fall on the OP rather than his elderly father. Not something I would willingly take on in preference to a clean break sale.

*her but otherwise you're bang on

poseidon1

mayflyjules said:

mybestattempt said:

poseidon1 said:

Simple response to your question, neither the LOA debt or costs incurred in registering the charge are allowable expenditure for CGT purposes.

The debt is of course a deduction against your mother's estate purely for probate and IHT purposes.

Turning too the actual calculation of CGT by reason of the sale by your father, are you aware that the calculation is in two parts?

The 1st part relates to your mother's half share at death. This half share receives a market value uplift for cgt purposes so any gain on that half is unlikely to  produce a gain on a sale so close to death, but may produce a loss related to 50% of sales costs( Solicitors and estate agents fees). Did you get a valuation of the property at death?

Your father's half share of the gain is time apportioned from the date he moved out in 1982 with a deduction for 50% of the solicitors/ agents fees. 

I'm afraid I don't agree with your method for calculating the capital gain arising when the property is sold as it seems the father is sole owner of the property (by survivorship as it was joint tenancy) from the date of death of the mother.

That being so there is only one gain and it's the acquisition cost/value which is made up from two separate figures.

As the property was bought jointly before 31 March 1982 the acquisition value is half the value at 31March 1982 (rebasing) plus half the value at the date of the death of the mother.

All the sales costs are deducted to arrive at the capital gain.

The capital gain when the property is sold will be:

Amount the property was sold for
•less half the value at 31 March 1982
•less half the value at the date of mothers death
•less the sale costs

Depending on the date the father moved out of the property in 1982 there maybe an amount of private residence relief to cover part of the gain.

Thank you for this response. Since what was my mother's share of the house has now gone to my father, and her share isn't considered part of her estate for probate purposes, I hadn't considered that only half of the purchase & sale prices should be counted for the CGT calculation (and of course the DPA debt would be within my mother's half so it takes care of that problem), and I didn't see anything mentioning this in my searches, so this is really valuable information!

There is 9 months of PRR from before he moved out plus 9 months from before the house is sold that he can claim, so I've already accounted for that.

Have to pull you up on your assumption your mother's half share of the house was not part of her reportable  estate on death, due to the joint tenancy devolving to  ex husband by survivorship.

 It is a common held and dangerous misconception that the survivorship status of jointly held property at death excludes the deceased's share  from consideration for IHT purposes.

Not a problem for married couples but the HMRC link I sent you makes it very clear that in this circumstance your mother's half share is reportable if IHT maybe in point, so you will have to revisit your IHT computations in this regard.

Hopefully after deducting the DPA from her half share the remainder of her reportable estate still sits comfortably within the £325k NRB.